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Melissa Gumecindo and David Lyles demonstrate the security procedures, including thumb prints, ID scans and photos, at Padnos. Photo by Michael Buck

(As seen on WZZM TV 13) A coalition of businesses in Michigan is driving a major overhaul of the state’s Nonferrous Metal Regulatory Act to make the sale of stolen scrap metal harder to get away with.

The major change in the existing law is to expand it to include ferrous metals — iron and steel — in addition to nonferrous metals such as copper, aluminum, lead, nickel, tin and zinc.

Other proposed changes relate to how and when an individual selling scrap is paid, and requirements for recording an image of the seller and the material being sold, up to and including videotaping the transaction.

Entities affected by the random disappearance of metal objects left unattended range from railroads and public utilities to farms and cemeteries. The Michigan Railroads Association is an active member of the coalition, as is the Michigan Farm Bureau, Consumers Energy, phone companies, MDOT and local governments, according to Jon Cool of the Michigan Railroads Association.

Tom Livingston, a representative of CSX, which has a major railroad yard in Wyoming on the east side of U.S. 131, said there are thefts of replacement parts and other materials placed temporarily in the railroad right-of-ways at locations throughout the state, and the CSX railroad police “feel that the situation is rampant.”

In a few cases, he said, heavy steel counterweights on crossing arms have been stolen. Thus, expansion of the law to include steel as well as nonferrous metals will help the railroads.

“We have been prosecuting these,” Livingston said. “We need a little help from the law to tighten things up.”

Padnos Inc., founded in Holland in 1905 by Louis Padnos, is among the three largest scrap-processing and recycling companies in Michigan and is very involved in the legislation that is expected to pass in January in the Michigan Legislature.

The company’s liaison with the Legislature is Roger Simon, who has worked in the industry for almost 30 years and was involved in the law passed in 2008. Simon is also a member of the Institute of Scrap Recycling Industries, Michigan Chapter.

“There have always been scrap metal thefts,” said Simon, but its value is relatively high now, mainly because scrap metal is a global commodity and the dollar is weaker overseas than it had been. Another reason thefts are more prevalent now may have to do with high unemployment.

But Simon is careful to point out that sometimes people may pick up a metal object in a public place thinking it has been abandoned and take it to the scrap yard to sell for a couple of bucks. The law really isn’t focused as much on those people as it is on the criminals who make a profession out of it — like the guys who crawl underneath parked cars and steal the catalytic converters. The platinum in them is typically worth from $10 to $80, according to Simon.

Unoccupied houses and summer cottages are another favorite target of thieves, who look for air conditioners and copper plumbing and wiring, or that old aluminum boat in the backyard.

“Today, a typical price for clean copper is $3 a pound,” said Simon.

“Clean” means other non-copper parts are removed and wiring has been stripped of its insulation.

According to the Institute of Scrap Recycling Industries, the U.S. exported more than 1.2 million metric tons of copper scrap in 2011, worth almost $5 billion, compared to the $500 million worth of copper scrap exported in 2000. China is the big customer, buying almost $3.5 billion worth in 2011.

Global demand for U.S. scrap aluminum also is rising sharply, according to ISRI — and again, China is the big customer, buying about two-thirds of the 2.1 million metric tons exported in 2011.

An aluminum canoe or rowboat left by the waterfront might be cut up in pieces, headed to Asia in the hold of a ship. Aluminum scrap was selling for more in 2007 and 2008, “but it’s still not bad,” said Simon, typically selling for about 50 cents a pound today. Scrap steel — such as old cars — is bought by the scrap yards for about 10.5 cents a pound.

Manhole covers are a heavy piece of steel and are sometimes stolen, especially in big cities. Scrap yards “know not to buy them,” said Simon, but professional thieves can break or cut up large metal objects to the point that a scrap buyer “can’t tell what it was, originally,” he said.

If an individual brings in a junked catalytic converter once or twice a year, it will probably be presumed legitimate, according to Simon. “If they are doing it three or four times a week and going to different scrap locations, we don’t know that,” he added. “So (the laws regulating scrap metal sales) give law enforcement a tool to track these trends.”

“A picture tells a thousand words,” said Simon, noting the drop in the price of cameras and video-taping equipment in recent years has made that technology a recommended part of the new law.

According to an analysis of the proposed law, HB 4593 (S-3), by the Senate Fiscal Agency, it would allow a scrap dealer to pay for metal only by check or money order, or by electronic payment card at an ATM on the premises, which would automatically record an image of the seller. Of course, identification already is required, and some scrap businesses take a thumbprint and maintain ongoing accounts for individuals who come in repeatedly.

Another clause in the proposed law would prohibit a scrap dealer from paying the seller until three business days after a transaction involving certain commonly stolen items — catalytic converters, air conditioners, and copper wire, pipe and fittings.

The legislation also is designed to encourage the scrap industry to use a real-time database that reports every purchase of scrap metal, which would be available to law enforcement agencies.

“This is all about communication between law enforcement, (the scrap metal industry) and insurance people. Those are the stakeholders,” said Simon. “We want to work with law enforcement. We want thieves to have consequences. We want buyers of scrap metal who don’t abide by the law to have consequences. That’s our objective.”

The Senate analysis of the proposed law notes that, in 2012, there were 19 felony convictions for selling stolen nonferrous metals; two resulted in state prison sentences, with the rest serving jail sentences or on probation. In the same year, there were four felony cases involving dealers who knowingly bought stolen scrap metal; two served time in state prison and two were put on probation.

The Padnos company recycles metals and plastics and has 20 locations throughout West Michigan and as far east as Lansing, plus a new location in Fremont, Ind. It employs approximately 600 people and processes more than 1 billion pounds of recyclable materials every year, according to company executive Shelley Padnos.

Pete Daly is a Grand Rapids Business Journal staff reporter who covers small business, banking and finance, food service and agriculture and government. Email Pete at pdaly at grbj dot com. Follow him on Twitter @PeteDalyGR

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